Renesas Electronics Corporation (TSE: 6723, hereinafter “Renesas”), a
premier supplier of advanced semiconductor solutions, has been
implementing a range of measures to strengthen its earnings base and
financial foundation, as outlined in press releases issued on July 3,
2012 and September 28, 2012, respectively titled “The Direction of
Various Measures to Establish Robust and Profitable Structure”, and “The
Progress of Various Measures to Establish Robust and Profitable Structure”.

In working to strengthen the company’s earnings base, since the merger
on April 1, 2010 Renesas has been pursuing integration synergies, and
building on its dominant number one position worldwide in the
microcontroller (MCU) market by optimizing our business portfolio and
streamlining the manufacturing structure among a range of other such
measures. Steady implementation of these measures has produced tangible
results, including an approximate 20% reduction in fixed costs in the
last two years.

However, after considering the impact of the 2011 Great East Japan
Earthquake, along with the impact of global economic uncertainty,
Renesas determined that further measures were necessary to respond to
dramatic changes in the global economic circumstances and domestic
operating environment. Accordingly, following an announcement on July 3,
2012, Renesas has been implementing additional business and structural
measures, centered on an early retirement incentive program and
significant restructuring of domestic production sites.

The early retirement incentive program, as outlined in Renesas’
announcement of October 16, 2012, received 7,446 applications, and all
applicants retired as of October 31. The restructuring of domestic
production sites has been proceeded as planned, including an agreement
to transfer Renesas High Components (Aomori Factory) to AOI ELECTRONICS
CO., LTD. as announced on October 12, 2012. Renesas intends to continue
efforts to create a lean organization and management structure, and
under the current management framework the company is planning to pursue
further rationalization initiatives to boost competitiveness, including
further optimization of the personnel structure.

In terms of strengthening the company’s financial foundation, on
September 28, 2012 Renesas announced new financing totaling 97 billion
yen from major shareholders and main banks. Renesas also entered into an
agreement for a syndicated loan totaling 161.1 billion yen, arranged by
the main banks, which allows the company to convert short-term debt to
long-term debt and secure stable long-term funding. Through these
initiatives Renesas has secured sufficient funding for the foreseeable
future to enable implementation of ongoing structural reforms.

Today, as detailed in a press release titled “Renesas Electronics
Announces Share Issue through Third-Party Allotment, and Change in Major
Shareholders, Largest Shareholder who is Major Shareholder, Parent
Company and Other Related Companies”, Renesas announced a decision
to issue 150 billion yen in shares through third-party allotment to The
Innovation Network Corporation of Japan (hereinafter “INCJ”), Toyota
Motor Corporation, Nissan Motor Co., Ltd., Keihin Corporation, Denso
Corporation, Canon Inc., Nikon Corporation, Panasonic Corporation and
Yaskawa Electric Corporation, with the aim of establishing a financial
foundation resistant to rapid changes in the global economy and domestic
business environment and investing in core business areas for growth to
enable a recovery in performance. Details of the third-party allotment
are available in the aforementioned press release.

In the emerging Smart Society brought about by the increasing pace of
network connectivity in electronic equipment and social infrastructure,
control systems that embed MCUs and IT equipment using SoCs are rapidly
converging. Therefore, the new market for control systems based on MCUs
is expected to expand. As this transition progresses simultaneously in
advanced and developing countries, an extremely large new market will be
created for the semiconductor industry to exploit. By strengthening its
earnings base and financial foundation, Renesas aims to respond to these
changes in the market and construct high value-added MCU-based kit
solutions for customers with further strengthened Analog and Power
semiconductors, which are essential to the kit solutions, while
improving its competitiveness in SoCs. Renesas will realize growth in
this new market by supplying platforms that combines these kit solutions
with software including IPs and OS commonly used for each application,
contributing to shorter development periods, increased cost
competitiveness and productivity for customers.

Renesas plans to use funds raised from this capital increase by
third-party allotment to realize its goal of growth in the Smart Society
through investment in the five areas outlined in the table below. Based
on this, Renesas seeks to ensure sales growth in these strengthened
areas, and achieve stable profits, while increasing corporate and
shareholder value.

[Specific Use of Funds Raised through Third-Party Allotment]

Specific Use

Amount(millions of yen)

Planned outlay period

(i)

Investment related to leading-edge process development of MCUs and
standardization of development basis

40,000

June 2013 to March 2017

(ii)

Capex related to production

(sample and mass production)

20,000

June 2013 to March 2017

(iii)

Investment in automotive semiconductor solutions

40,000

June 2013 to March 2018

(iv)

Investment in industrial semiconductor solutions

40,000

June 2013 to March 2017

(v)

Development investment for rebuilding the management base

10,000

June 2013 to March 2016

(1)Strengthen core
competencies

To strengthen the company’s core competencies, Renesas must first invest
in the development of the latest 28nm MCU process technology and in the
standardization of development basis as stated in (i) above, taking
steps to maintain our dominant leadership of the global MCU market.
Regarding capex related to production (sample and mass production) as
stated in (ii) above, capex will be pursued to increase the
profitability of existing processes currently in mass production and to
improve competitiveness of the latest processes currently under
development. Along with these investments, Renesas will also invest for
applying finer process nodes and larger wafers to analog products,
thereby improving product competitiveness.

(2)Strengthen
semiconductor solution provision capabilities

In relation to investment (iii) and (iv) above, namely, investment in
automotive and industrial semiconductor solutions, Renesas will
strengthen its Analog & Power semiconductor technological capabilities,
which are indispensable to kit solution proposals for customers,
centered on our existing dominant leading market share in MCUs, as well
as to pursue M&A and collaborations in Analog & Power semiconductors to
enhance the product line up. In addition, as a means of increasing the
ability to provide compelling solutions, Renesas will investigate M&A
and collaboration with the makers of embedded operating systems and with
IP vendors, and will also consider M&A with independent design houses in
emerging economies.

Renesas will also pursue business expansion in semiconductor markets
with high growth potential, including HEV and EV and various vehicular
information systems in the automotive sector, smart-grid technology in
the industrial sector, and also in the area of new electronic controls
equipment that is being driven by the progress of network connectivity
of electronic equipment and social infrastructure in the emerging Smart
Society, as noted above.

(3)Increase
resistance to rapid market changes

In relation to investment (v) above, namely, development investment for
rebuilding the management base, one of the aims is to improve the
business evaluation system to speed up decision-making in response to
sudden market changes. Another is to improve resistance to seismic
activity for manufacturing equipment, establishing multi-fab production
for creating a more robust business continuity plan (BCP) to ensure the
stable supply of products to customers.

Through this growth investment, which is necessary to survive and
prosper amid tough global competition, Renesas will strive to enhance
core competencies that differentiate its business from competitors and
achieve a rapid improvement in profitability. In the mid-and-long term,
Renesas aspires to develop its platform business, strengthen
semiconductor solution provision capabilities and optimize customers’
systems, thereby contributing to sales growth in core areas, higher
profitability, and improved corporate and shareholder value in the
future.

About Renesas Electronics Corporation

Renesas Electronics Corporation (TSE: 6723), the world’s number one
supplier of microcontrollers, is a premier supplier of advanced
semiconductor solutions including microcontrollers, SoC solutions and a
broad-range of analog and power devices. Business operations began as
Renesas Electronics in April 2010 through the integration of NEC
Electronics Corporation (TSE:6723) and Renesas Technology Corp., with
operations spanning research, development, design and manufacturing for
a wide range of applications. Headquartered in Japan, Renesas
Electronics has subsidiaries in 20 countries worldwide. More information
can be found at www.renesas.com.

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